Fed Probably Wants to Extend Lending Programs: Kroszner
Federal Reserve Chair Jerome Powell said “now is not the time” to be discussing an exit from ultra-easy monetary policy and promised to give plenty of notice before the central bank began to debate scaling back its massive bond-buying campaign.
“We know we need to be very careful in communicating about asset purchases,” he said Thursday during a virtual discussion. “Now is not the time to be talking about exit. I think that is another lesson of the global financial crisis, is be careful not to exit too early.”
Hopes for a stronger-than-expected recovery have fueled speculation that officials could lean toward reducing the pace of bond buying later this year. The Federal Open Market Committee last month pledged to continue to make US$120 billion in monthly purchases of treasuries and mortgage-backed securities until there’s “substantial further progress” toward employment and inflation goals.
Powell last month described the guidance as “powerful,” but its vagueness has led to differing interpretations among policy makers and investors. Governor Lael Brainard on Wednesday said the pace would be appropriate for “quite some time,” though at least four Fed presidents have said a strong economy could prompt discussion of tapering of bonds late this year.
The Fed chief promised that there would be ample warning if conditions were getting ripe to consider dialing the asset buying back.
“We’ll let the world know,” he said. “We’ll communicate very clearly to the public and we’ll do so, by the way, well in advance of active consideration of beginning a gradual taper of asset purchases.”
--With assistance from Christopher Condon.